The U.S.–Iran memorandum of understanding put the global tape on a single script overnight, and the trade in Asia and Europe on Tuesday morning was the same one Wall Street ran on Monday: risk-on, oil down, dollar softer, and long-duration Treasuries bid. Japan’s Nikkei 225 added 1.4 percent in early trade, with the yen-sensitive index getting an extra tailwind from a 0.3 percent dip in the dollar-yen pair. Hong Kong’s Hang Seng gained 2.1 percent, South Korea’s Kospi climbed 1.8 percent, and Australia’s ASX 200 rose 0.9 percent, leaving the MSCI Asia-Pacific index on track for its best single-session gain since the March 31 risk-on squeeze. In Europe, the Stoxx 600 opened 1.1 percent higher and London’s FTSE 100 added 0.6 percent, Singapore futures pointed higher into the New York open, and the only major regional sectors in the red were energy and basic resources as crude extended Monday’s slide.
Oil Breaks $80 and Refining Margins Start to Fade
The clearest signal that traders believe the deal is real, not another false dawn, came from crude. Brent slipped below $83 a barrel in London trade and U.S. West Texas Intermediate was last seen around $78, putting both benchmarks on track for a two-day loss of more than 6 percent. Refining margins for jet fuel and diesel, which had spiked with the war premium, are now giving back roughly a third of the move they made in the four weeks through June 12. The market is no longer pricing the Strait of Hormuz as a tail risk. With Friday’s signing now formally scheduled in Geneva, and the U.S. naval blockade already lifted, the path of least resistance for crude is sideways to lower into the back half of the month, and gasoline futures are expected to follow within a week rather than a month.
The Dollar’s Mute Response Is the Real Story
Here is the more interesting tell. A geopolitical settlement that removes an oil shock and pulls inflation expectations lower would, in a textbook world, send the dollar sharply lower — the kind of risk-on, weak-dollar session that defined the back half of 2025. The DXY is down only about 0.3 percent on the move. That is a deliberately small response, and it tells you two things. First, foreign-exchange traders do not believe the deal is fully priced. Second, the rate-differential trade still has room to run, because the Federal Reserve has not yet signaled that a softer inflation print means an earlier cut. The euro held above $1.095, sterling held above $1.285, and the yen held near 154.50 — all of which keeps the door open for a larger dollar move once the FOMC blackout lifts and Fed speakers return to the tape on June 27.
Treasuries Bid, Curve Bull-Steepens, and the Fed Goes Quiet
The U.S. Treasury market is doing something more interesting. The 10-year yield is down roughly 4 basis points on the day to 4.14 percent, the 2-year is down about 5 basis points to 3.78 percent, and the 5s30s curve is bull-steepening by 2 basis points. That is a growth-friendly, soft-landing read, not a recession trade. Real yields are leading the move, which means inflation expectations are steady while the market is pricing in a slightly easier path for the Fed. Two cuts are now back in the December OIS curve, and the May PCE print due Friday is the next major catalyst. With the FOMC in its standard pre-meeting blackout, the only Fed voices left on the calendar this week are regional presidents on the speaking circuit, none of whom are likely to break ranks on the timing of a first cut.
Credit Tightens, Vol Sells Off, and the Risk-On Trade Has Room
Investment-grade and high-yield credit spreads both tightened by 4 to 6 basis points in Asia and Europe, putting the Bloomberg U.S. Corporate OAS index on track for its tightest print in three weeks. The VIX dropped below 14 in pre-market trade, its lowest reading since early May, and the MOVE index on rate volatility fell to a one-month low. Implied correlation across the S&P 500 also rolled over, which is the signature of a genuine risk-on tape rather than a narrow rotation led by megacap technology. Gold, which would normally struggle in a risk-on session, held above $4,290 — a sign that the central-bank bid is still alive and that traders are hedging the residual tail risk that Friday’s signing does not actually close the conflict.
What to Watch Into Friday’s Signing
Three prints will frame the rest of the week. First, U.S. retail sales for May on Tuesday, where a soft number would reinforce the disinflation read. Second, industrial production on Wednesday, which is the cleanest read on whether the manufacturing side of the economy is stabilizing. Third, and most important, the May PCE deflator on Friday morning, with consensus looking for a 2.1 percent year-over-year headline and a 2.4 percent core — both of which would put the Fed back on a glide path toward a first cut in September. If those prints land in line, the dollar’s muted response becomes a coiled spring, and the equity rotation that began on Monday has another leg to run. If they miss, the Iran-deal trade gives back half its gain in a single session and the Fed is back to being the only story that matters.